Notice Returned As 'Unclaimed' At Correct Address Suffices For Deemed Service: Kerala High Court

A cheque demand notice returned with the postal endorsement "unclaimed" is sufficient to satisfy the statutory requirement of notice in a cheque dishonour case, the Kerala High Court has held.

Justice A Badharudeen, allowing an appeal against an acquittal recorded by a magistrate's court in Kozhikode, held that when a demand notice is issued to the drawer's correct address, its return with the endorsement "unclaimed" would amount to deemed acceptance unless the accused proves otherwise.

The court observed, "Thus, issuance of notice in the known address of the drawer of the cheque would suffice the requirement of notice under Section 138(b) of the N.I Act. When notice was issued to the drawer of the cheque and the same returned with endorsement `unclaimed', unless the accused is able to establish that the notice was not issued in his address by convincing evidence, return of the demand notice with endorsement `unclaimed' would suffice the requirement of issuance of notice as well as its deemed acceptance.”

The case arose from a complaint alleging that the accused had borrowed ₹90,000 from the complainant and had issued a cheque for the same amount in discharge of that liability. When the cheque was presented for collection, it was dishonoured for insufficiency of funds.

The complainant thereafter issued a demand notice. The notice was returned with the endorsement "unclaimed".

The trial court acquitted the accused after finding that the complainant had failed to prove the transaction and execution of the cheque. It also held that there was no legal notice in the eye of law.

Challenging the acquittal, the complainant argued that the notice had been issued to the accused's correct address and that the trial court had wrongly relied on a minor inconsistency in his evidence to reject the prosecution case.

Upon examining the record, the High Court found that the complainant's evidence regarding the loan transaction and the issuance of the cheque had remained unshaken during cross-examination. The Court also noted that the accused had not adduced any evidence in support of his defence and had not examined the complainant's nephew, whose alleged transaction formed the basis of the defence version.

On the issue of notice, the Court held that the trial court's finding was "patently illegal". It noted that the notice had been returned as "unclaimed" and that summons later issued to the same address had been accepted by the accused.

The Court observed, “This endorsement would indicate that the reason for return of the notice was refusal on the part of the accused/addressee to accept the same.”

Referring to the Supreme Court's decision in Alavi Haji v. Palappetty Muhammed, the Court noted that a demand notice sent by registered post to the correct address of the drawer is deemed to have been served.

The High Court also rejected the trial court's reliance on an inconsistency regarding the relationship between the parties. While the complaint stated that the accused was known to the complainant, the complainant described him as a friend while giving evidence.

According to the Court, the distinction was of little significance because both descriptions merely indicated acquaintance between the parties and did not affect the complainant's version of the transaction.

Holding that the complainant had established the transaction and execution of the cheque and was therefore entitled to the statutory presumption, which remained unrebutted, the Court set aside the acquittal and convicted the accused.

The accused was sentenced to imprisonment till the rising of the court and directed to pay a fine of ₹1.30 lakh. In default of payment, he would undergo imprisonment for four months.

For Appellant: Advocate Ranjith Narayan A

For Respondent: Advocates M Muhammed Shafi, A Parvathi Menon, P Sanjay and Vipin Narayan A, Sr Public Prosecutor